Bloomberg News

Moody’s Cuts Argentine Oil Companies on Capital Control Law

October 31, 2011

(Updates with analyst’s comment in fourth paragraph.)

Oct. 31 (Bloomberg) -- Moody’s Investors Service cut its ratings on Argentine oil and gas companies and placed them on review, citing a government decree requiring firms to repatriate all of their export proceeds and convert them to pesos.

The foreign currency rating of Pan American Energy LLC’s Argentine unit was reduced one step to Ba3, three levels below investment grade, according to a statement. Moody’s also cut Petrobras Argentina SA, a unit of Brazil’s state-controlled oil company, to Ba3 and lowered the global local currency rating of YPF SA, Argentina’s largest energy company, to Ba2, according to the statement. All ratings are on review for downgrade, Moody’s said.

Last week, President Cristina Fernandez de Kirchner ordered gas, oil and mining companies to repatriate all future export revenue, told insurance companies to bring investments back into the country and sent tax agency inspectors into exchange houses as part of an effort to strengthen central bank controls on dollar purchases.

“The decree highlights the high level of unpredictability of the Argentine government and heightened risk of increased capital controls and regulatory changes in the country,” Moody’s said in the statement. “While Moody’s believes this change has not impacted the day-to-day operations, debt service payments and dividend flows from these companies, their overall transfer and convertibility risk profiles have increased.”

--Editors: Brendan Walsh, Marie-France Han

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net


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